Nominal wage contracts, adjustment costs and real persistence of monetary shocks
AbstractThis paper describes a model in which monetary shocks have persistent real effects. Starting from the limited participation model of Christiano (1991) with capital adjustment costs as suggested by Dow (1995) it is confirmed that costs of equipment installation and restrictions on consumer portfolio choices alone cannot account for the observed effects of monetary policy. However, after introducing nominal wage contracts as a third friction, the model generates real effects of monetary shocks. It is shown that these real effects are highly persistent for a realistic size of adjustment costs and strongly autocorrelated money growth shocks which are typical for Europe.}
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series WO Research Memoranda (discontinued) with number 566.
Date of creation: 1998
Date of revision:
Monetary general equilibrium model; monetary transmission; liquidityeffects; nominal wage contracts;
Find related papers by JEL classification:
- D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
- E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
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- Roberto Duncan, 2005.
"How Well Does a Monetary Dynamics Equilibrium Model Account for Chilean Data?,"
Central Banking, Analysis, and Economic Policies Book Series,
in: Rómulo A. Chumacero & Klaus Schmidt-Hebbel & Norman Loayza (Series Editor) & Klaus Schmidt-Hebbel ( (ed.), General Equilibrium Models for the Chilean Economy, edition 1, volume 9, chapter 6, pages 189-220
Central Bank of Chile.
- Roberto Duncan, 2002. "How Well Does a Monetary Dynamic Equilibrium Model Account for Chilean Data?," Working Papers Central Bank of Chile 190, Central Bank of Chile.
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